Stock ISA lump or drip

Paul_Herring

pos

Si1503 wrote:

Are stocks and shares ISAs not tax free?

Sort of. However, if you're a basic rate tax payer, you don't (usually) pay any extra tax if you don't hold stocks and shares in an ISA - dividends are taxed at 10% whether they're in an ISA or not.

There's a possible exception are if you're holding sufficient quantities of stocks to broach any capital gains limits - say, for example, you're using a S&S ISA instead of a pension as a wrapper for your retirement.

cheerfulcat

Supernova wrote:

Guys,

I've maxed out cash ISAs for many years but held off this year to go for a maxi stocks ISA for long-term growth (say 13 or so years).

I read that drip-feeding a Tracker (or Managed fund), for instance, was probably the best way of smothing out ups and downs but would it be wise to drip in the full £7K by the end of the tax year or maybe just settle for a mini cash and mini stocks this time as I'm a complete novice investor (shudder)?

Ta

Hi, Supernova,

You can put the full ISA allowance into the wrapper before the end of the tax year and drip feed the fund at your leisure from there using a self-select ISA from a broker.

Just as a general point; there is IMHO no generic " best " way to use one's ISA allowance; it is very much an individual matter and you are the only person qualified to make the judgement. It could be argued that you should keep growth shares within the ISA and HYP outside, because in a " proper " HYP you won't be selling much, so CGT shouldn't be a problem, whereas the growth shares would be expected to, well, grow and then you sell them for a handsome, tax-free profit and repeat the process...OTOH, as a HRT payer you would be paying extra tax on dividends outside of the ISA ( and for someone just on the cusp of HRT, the grossed up divis could take them over the line ). Only you can decide whether your CGT liability is likely to be greater than the extra IT liability. There is an added complication in that even though you may intend to hold your HYP shares until the bitter end, they can still be bought off you by force in a takeover

Right I'm confused about whether I as an HRT need to bother using my shares ISA allowance at all.

Yes, you do if you want to maximise your investment returns.

Otherwise, is it not worth using my annual allowance for growth stock ISAs at all? Ever?

It is always worth using your allowance. Do not be misled by the school of thought which finds the annual CGT exemption sufficient. It might seem a lot at first but after five or six good years of investing it will seem very mean indeed ( as of course it is ).

EDIT: Meant to add re: cash ISAs, for a HRT payer right now I think that the NS&I Index Linked Certificates, tax free and with a rate of 1.10 - 1.15% over RPI ( total currently = a gross rate of 8.41% for HRT payers ), look very attractive as an alternative. Bear in mind that while the interest rate is fixed, the RPI is of course variable.

Supernova

Thanks cheerfulcat, more options to ponder :-)

Hadn't seen the NSA&I stuff before - depends on the prospects of RPI compared to interest rates I guess. That's if I have anything left over from offsetting the mortgage and ISAs. I'll read the T&Cs about what happens if you need to cash them.

zed_sump

can anyone please advise on which are presently the best Self-select ISAs please? i started with maxi isas last year with the natweststockbrokers product which i closed after 8mths and a profit of £1000 (not bad for a complete beginner?!!). one valuable function that was missing on that account was the rising buy order... i've had a look at hoodless-brennan but was surprised to find they only allow deals on european and USA markets - a large portion of my previous profit came from a toronto listed company, Silvercorps and there are a number of Aussie co.s looking very good presently... but couldn't touch them in Hoodless Brennan!... does anyone have experience of other providers that offer a competitive product?
thanks in advance.

jamesd

zed sump, ask in a topic just for your question and include in the subject that you want to invest in shares outisde EU and the US.

Robbenismyhero

Paul_Herring wrote: »

pos Sort of. However, if you're a basic rate tax payer, you don't (usually) pay any extra tax if you don't hold stocks and shares in an ISA - dividends are taxed at 10% whether they're in an ISA or not.

There's a possible exception are if you're holding sufficient quantities of stocks to broach any capital gains limits - say, for example, you're using a Stocks ISA instead of a pension as a wrapper for your retirement.

Can anyone tell me if this is still the case? I'm looking at the advantages of holding shares in an ISA wrapper compared to just a regular account because I doubt I'll ever be elligible for CGT Thanks.

Paul_Herring

Where'd that link come from in that bit you quoted me from?

Yes, it's still the case.

You still can't get that 10% back no matter which income tax band you fall in, and ISA's are only useful for basic rate tax payers who are likely to breach their CGT allowances.

If you're a higher rate tax payer, the ISA means you don't pay the extra 22.5% tax on dividends.

If the end gain is greater than £9,600 when you come to sell your shares, an ISA would protect you from the 18% tax on anything above that.

jem16

Paul_Herring wrote: »

Where'd that link come from in that bit you quoted me from?

he has posted in 4 pension threads, three about buying an annuity from H-L and one buying a SIPP from H-L. More often than not bringing up old threads long since gone. Try looking back at his previous posts.

Methinks he works for H-L or is doing a bit of spamming.